70 cents per track is “in the correct range,” says UMG attorney

Although the labels have yet to divulge the wholesale prices at which they …

There's a new development from yesterday's story on wholesale download pricing. While the record labels are still unwilling to divulge their wholesale pricing structure for online music sales in UMG v. Lindor without strict confidentiality provisions, an attorney for UMG has told opposing counsel Ray Beckerman that the 70¢ per track figure is in the ballpark.

The revelation comes from an e-mail exchange between Richard Gabriel, counsel for UMG, and Marie Lindor's attorney Ray Beckerman that occurred in December, but was just made public today. In a December 19, 2006 e-mail to Beckerman, Gabriel said that the wholesale prices paid to the labels by the likes of Apple, Real, Napster, and others are not uniform, but "cover a range, with 70¢ being in the correct range."

The pricing information could be crucial for defendant Marie Lindor as she makes the argument that the $750-per-song damages sought by the RIAA are excessive and unconstitutionally severe. Lindor argues that the actual damages suffered by the RIAA are in line with the wholesale price per song, and if that is indeed the case, damages should be capped accordingly—between $2.80 and $7.00 per song—if infringement is proven.

A proposed order filed yesterday would force the recording industry to divulge closely-held details of their wholesale pricing arrangements. The record labels are fighting Lindor's attempts to gain access to the pricing information. They have argued that it shouldn't be divulged, and if it is, it should only be done so under a protective order that would keep the data highly confidential. The RIAA regards the wholesale price per song as a trade secret.

The pricing data really may not be all that secret. Late in 2005, former New York Attorney General (and current Governor) Eliot Spitzer launched an investigation into price fixing by the record labels, alleging collusion between the major labels in their dealings with the online music industry. Gabriel believes that making the pricing information public would "implicate [sic] very real antitrust concerns" as the labels are not supposed to

Gabriel also calls the pricing information "highly proprietary," saying that each plaintiff in the UMG v. Lindor case has engaged in independent negotiations with the download services. As a result, "each of the record companies is aware only of its own pricing and does not know what the others charge," wrote Gabriel.

Beckerman argues in a letter to the judge that the only reason the labels want to keep this information confidential is to "serve their strategic objectives for other cases," which he says does not rise to the legal threshold necessary for a protective order. The proposed order would force the labels to turn over contracts with their 12 largest customers. Most details—such as the identities of the parties—would be kept confidential, but pricing information and volume would not.